1.2.2 Imperfect information

Imperfect Information

A situation where one party in a transaction has more information than the other, affecting decision making.

Symmetric Information

A situation where all relevant information is known by both parties in a transaction.

Asymmetric Information

A condition where one party in a transaction possesses more or better information than the other party.

Perfect Knowledge

A theoretical concept where all consumers in a market have complete knowledge of prices, quality, and availability of products.

Lemon

A term used to describe a car that has undisclosed problems, which the buyer discovers only after purchase.

Information Failure

A type of market failure that occurs when there is asymmetric information, leading to exploitation or lack of trust between parties.

Market Failure

A situation where resources are not allocated efficiently in a market.

Economic Agents

Individuals or entities that make economic decisions, such as consumers and producers.

Consumer Protection Laws

Laws designed to ensure the rights of consumers, including the right to refunds for faulty goods.

Market Demand

The total quantity of a good or service that consumers are willing and able to purchase at a given price.

Long-term Consequences

Outcomes that affect individuals or markets over an extended period, such as the health effects of smoking.

Information Failure at Supermarkets

Occurs when consumers are confused by complex information, leading to poor purchasing decisions.

Compulsory Labelling

Mandated requirement for products to have clear labels detailing contents, benefits, or risks.

Marginal Private Benefit (MPB)

The additional benefit received by consumers from consuming one more unit of a good or service.

Market Equilibrium

The point where the quantity of goods supplied equals the quantity of goods demanded.

Campaigns for Awareness

Initiatives aimed at educating the public about risks related to health, safety, or economic choices.

Technical Information

Complex data or terms related to products that may be difficult for consumers to understand.

Consumer Trust

The belief that a seller provides value and fairness in transactions, impacting market efficiency.

Informed Consumer

A buyer who is knowledgeable about the products and services they purchase, leading to better decision-making.

Economic Decision Making

The process by which consumers and producers choose how to allocate resources or make purchases.

Government Intervention

Actions taken by the government to influence the economy or regulate markets.

Imbalance of Power

A situation in transactions where one party has significantly more influence or information than the other.

Nutritional Information

Details provided about the content of food products, often required by law to help consumers make informed choices.

Merit Goods

Goods that are deemed socially desirable and are typically under-provided in a free market.

Performance League Tables

Rankings that provide information on the performance of institutions, such as schools, to inform consumer choice.

Complex Information

Data that is not straightforward and requires effort to understand, often hindering decision making.

Second-Hand Products

Used goods that are typically sold at lower prices but may carry risks due to lack of information.

Consumer Awareness

The understanding that consumers have regarding their rights and the information available about products.

Information Asymmetry

A situation where there is unequal information among parties in a transaction.

Legal Jargon

Complex legal terms that may confuse consumers and affect their understanding of agreements.

Cigarette Labelling

Mandatory warnings on cigarette packages to inform consumers about health risks.

Pension Contributions

Funds paid into a pension scheme which may involve complex decisions due to a lack of clear information.

Internet and Information Asymmetry

The impact of online resources in reducing the information gap between consumers and sellers.

Road Safety Campaigns

Public initiatives aimed at educating audiences about safe driving practices.

Gambling Addiction Awareness

Campaigns focused on informing individuals about the risks and consequences of gambling.

Energy Market Asymmetry

The imbalanced information available to different customers regarding energy pricing and usage.

Benefits of Improved Information

Positive impacts that arise when consumers have better access to information regarding goods and services.

Impact on Resource Allocation

The effect of information quality on how resources are distributed or used in a market.

Misallocation of Resources

An inefficient distribution of resources caused by incomplete or asymmetric information.